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ISLAMABAD: Amid hopes of reaching an agreement with the International Monetary Fund (IMF) on a basic economic policy framework programme, Pakistan is likely to receive the first tranche of $1 billion under the balance of payments support from the Kingdom of Saudi Arabia within the next couple of days, boosting the country’s plummeting foreign currency reserves.

The money would hopefully reach the State Bank of Pakistan (SBP) by Monday, Finance Minister Asad Umar told Dawn in an exclusive talk. He said, “My Saudi Arabian counterpart has given me an assurance in this regard.”

The second and third tranche will be received over the next two months.

Last month Saudi Arabia had agreed to provide a $6bn package to Pakistan to support its ailing economy. The package included $3bn balance of payments support and another $3bn in deferred payments on oil import.

Mr Umar said the facility of deferred payment on oil import would mature by next month. However, the finance minister, who sounded very confident that an immediate balance of payments crisis had been overcome with the help of bilateral assistance from Saudi Arabia and China, did not give any figure. “This will be an unprecedented help from China,” the minister said, adding that he had committed not to disclose details before it was finalised. “I will not divulge the details at this moment,” he reiterated.

He claimed that the only reason of going to the IMF was to accelerate the pace of economic growth and not to seek loan to fill any gap. He explained that he was not negotiating terms of a loan but of a ‘broader economic reforms package’.

The available IMF funding quota for Pakistan is approximately $6-6.5 billion.

The government had taken several steps including reduction in expenditures to bring drastic cut in the current account deficit. “We will reduce the current account deficit to $12bn by the end of June 2019, almost $7bn reduction,” the minister declared, explaining that this was the government target for the first year.

He said the IMF package would play a small part in filling the balance of payments gap directly though it would pave the way for getting loans from multilateral donors and commercial creditors.

Pakistan was negotiating the basic economic policy framework agreement with the IMF, he said. “This will be our basic achievement which we are hoping to reach by Nov 20,” he said, adding that details could be negotiated later.

He said there was no difference of opinion about putting economy on the right course with the IMF support. The only issues that could come up during the talks were related to ‘pace of adjustments’ and ‘pace of burden’.

“Our direction is very clear that we will place burden only on higher income individuals,” he said. It was common understanding that IMF would ask for more revenue to reduce fiscal deficit, reducing line losses in gas and power sector and increase it further, he said. But it would be the government decision whether to pass on the burden, he added.

“I will not hide behind IMF if I believe that certain measures are required to fix economic issues,” he said, claiming that both sides had already reached an agreement on basic facts and also exchanged the frameworks.

On Monday, the minister said that he would be in a better position to see whether there was a larger agreement or gaps still existed in the negotiations. He clarified that it would be the government decision how to reduce the fiscal deficit.

Mr Umar admitted that increase in revenue was one of the major areas of discussion. He made it clear that the shape and quantum of total additional revenue would be decided by the government and not the IMF.

About privatisation, he said Pakistan and IMF had no differences on structural reforms, as his government had identified seven companies for privatisation out of 50 to 60 state-owned enterprises placed on active privatisation list for many years. Even if LNG company was privatised, its cumulative impact would be more than the whole five years privatisation progamme of the previous government, he claimed.

The placement of 50 to 60 companies on active privatisation plan was to make these entities redundant, he said, adding that the PTI government had already declared that strategic assets such as Pakistan Steel Mills, Pakistan Railways and Pakistan International Airlines would not be privatised but would be restructured on professional lines. He added that the government had given a 45-day ultimatum to the PSM management to come up with a comprehensive plan with regard to running the mills at its full capacity.

Comments (42) Closed

Collecting loans from everywhere without any plan for revenue generation

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Mr.Afghani

Nov 18, 2018 07:49am

190-300 million USD is decreased from SBP weekly.
1 Billion is only enough for 3-4 weeks. What will happen after that? Keep borrowing???

Find a solution, browsing won't fix the issue. Just saying...

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Farhan

Nov 18, 2018 07:51am

What an astounding accomplishment. Thanks IK.

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Nadir

Nov 18, 2018 07:57am

The money from SA is Bridge Financing to avert a crises and to buy us some time. Please remember it is a loan and must be payed back within the terms, as agreed.

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Adi

Nov 18, 2018 07:58am

So far getting assistance has been his only achievement !

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Fair Person

Nov 18, 2018 08:16am

Feeling sorry for you guys.

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Dilip singh

Nov 18, 2018 08:17am

We started at same time.. See your linguistic narrow mindset has taken you where? Come out of it.. It's the people of Pakistan who has to change and not the leaders, for any visible economic and social development

How long nation can keep borrowing for survival ? Any steps to reduce dependence on external debt ?

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Perspective

Nov 18, 2018 09:26am

“He claimed that the only reason of going to the IMF was to accelerate the pace of economic growth and not to seek loan to fill any gap. ”

Utter lies. IMF structural program will force you to rein in fiscal deficit and reduce aggregate demand. This will reduce growth rate. It cannot possibly accelerate it.

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Chinpaksaddique

Nov 18, 2018 09:38am

Hooray! Success!! Great PMIK

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Philosopher (From Japan)

Nov 18, 2018 09:42am

Only 1 billion???

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GK

Nov 18, 2018 09:43am

Excellent work. now sleep peacefully.

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Priyesh

Nov 18, 2018 09:46am

Yohooo.....what an accomplishment..... it's time to party.....

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Sameer

Nov 18, 2018 09:55am

I have never seen a gov more proud to have loans! The need to be repayed you know?

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Truth will always prevail

Nov 18, 2018 09:57am

He should not announce this publicly now money trader will make unfair money on currency

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vivek

Nov 18, 2018 10:05am

since the first announcement of this 3 billion deposit, the reserves have been decreased by around 800-900 million.So this 1 billion will have not much effect.Rest 2 billions will be given after two months,by that time reserves will fall by another 1-2 billions considering scheduled repayments of 1.7 billion in December.Overall not much increase in reserves.

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ExPat

Nov 18, 2018 10:37am

@Mr.Afghani, You guys have enough of your own problems. We will no brook any lectures from you. Thank you, now goodbye.

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SHAHID SATTAR

Nov 18, 2018 10:50am

Could the citizens get credited their share of this and the next coming bonanzas directly to their bank accounts?

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Ob

Nov 18, 2018 11:14am

@Himmat,

Do you know which other country relies on external borrowing to run its country?

The USA

Borrowing is not bad. What matters is what you do with it - This round of borrowing is simply to roll over the existing borrowing and to pay the interest on existing borrowing.

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SHAHID SATTAR

Nov 18, 2018 11:29am

@Sameer, The repayments will have to be made by the governments of the future dates when they fall due. The present payments are being made for loans borrowed during the tenure of the past governments. So every one is happy and angry at the same time.

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fakhar

Nov 18, 2018 11:52am

People teaching this government about not to take loans and asking about payment of them look so....newly moved from village to cities.

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BG

Nov 18, 2018 12:11pm

WOW!! COOL. Now Party.

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Lk

Nov 18, 2018 12:18pm

Pak eagerly waiting for the $1 billion handout. And then waiting for more handouts from multiple sources...
What a sad state of affairs after 70plus years after independence...

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Anujrj@yahoo.com

Nov 18, 2018 12:21pm

A billion USD of cash loan coming in is big news in Pakistan? To be announced by a senior bureaucrat as an achievement? Wow !

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anwarsher

Nov 18, 2018 12:38pm

In this electronic age, it takes seconds to remit money across countries. Why not right away? Why tomorrow?

What about when we have to return this loan?. I think it's just a temporary solution we have to focus to develop some permanent solution to overcome these crisis.

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INDIAN NO 1

Nov 18, 2018 01:31pm

Not for Pakistani peoples. It's for Pakistan politicians.

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naim

Nov 18, 2018 01:40pm

The minister “ explained that he was not negotiating terms of a loan but of a ‘broader economic reforms package”. Unfortunately, this is not the whole truth. The real reason is that Pakistan’s lender friends do not want to offend the IMF, a US-dominated controller, by bypassing it while lending to us. But unfortunately the IMF is always harping on the same tune ; ordering us to increase taxes and reduce rupee value. The net result of these conditions is that due to increase in cost of doing business the exports, which are already too low, decrease further down, and we thus remain perennial borrowers subject to lenders’ pleasure. No economic uplift is possible if we keep on submitting to IMF terms.

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Bipul

Nov 18, 2018 02:03pm

@Hamza, Permanent solution is to trade with neighbors. If not then find oil.

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Dr BN Anand

Nov 18, 2018 02:07pm

Never witnessed such a desperate financial position of Pakistan when every penny being awaited and to see when it would get credited in SBP from a foreign source.

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Truth

Nov 18, 2018 02:16pm

All this will go to the iron brother, he will need his money serviced

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manjeet

Nov 18, 2018 02:21pm

There after?

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ISHIKA

Nov 18, 2018 04:58pm

Ok so lets get this straight, they first announced that they will get 3 billion and never said it will come in installments. Why wasn't the public and parliament not enlightened about the same?

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M.Saeed

Nov 18, 2018 07:12pm

Let us hope tomorrow's good news materializes.

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Amit Gaikwad

Nov 18, 2018 10:33pm

@Sameer, The people of Pakistan will repay this for years to come .... not imran khan or asad umar !!!

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LAHORI KID

Nov 19, 2018 06:16am

@Mohd Jhattu Katua Khan, They have a plan, they know exactly what they need,that's why they are going after different places for loans. Its simply stupid to assume there isn't a plan. Get used to it, its PTI, not PML-N.